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Buzz Bits

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An evening taste of the daily buzz...

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Somethin' Like a Phenomenon... - David Miller - 3:31 PM

The week back from traveling is always crazy. This one was made more so by lots of news flow in our little corner of the world and prior committments. The Abgenix (ABGX) aquisition seemed to provide only a momentary bump in the sector, but it certainly put the idea of a sector shopping spree into the limelight for a while. I think Pfizer's (PFE) acquisition of Vicuron started the trend mid-year, but whatever.

Unlike this time last year, we now know there is a calendar-based bumper stop to this phenomenon (accounting changes). After over a year of saying this would be a driver, I think we'll get a certain answer in 2006.

Will big pharma see a return in 2006? I think it will depend on how Wall Street views a string of company and product acquisitions that will dent pharma cash hordes. If the view is positive (replenishing the pipeline), then pharma will do well. If the view is negative (no help this decade), then pharma will be a tough play.

Wall Street Meets Madison Avenue? - Todd Harrison - 1:23 PM

I don't sneak out very often but President Fish, of the Madison Avenue Fishes, just returned from a business trip and we had a lot to chew through. As such, he grabbed me by the ear and insisted that I join him for an out-of-the-office lunch. Vibe time with my best friend? How can I say no to that?

I return to MVHQ to find the critters snoozing and the ticks flickering ever-so-lightly. We know that expiration action typically occurs around the bells so it's not much of a shocker. Even so, in my diligent quest to exhume value from the most quiet of tapes, I offer the following observations:

  • Crude is off 2.5% (heating oil and nat gas aren't far behind) and that's weighing on the energy patch. Still, the OSX, which is up 24% off the October lows, hangs in there (-1%).
  • The XAU, after filling the December gap, has managed to make a stand above 120. The metals trade fluxy--and futher profit taking is possible--but I like my "widen your stance and buy on dips" mentality in this group.
  • Pharma, despite Pfizer's (PFE) non-participation, is atop the leaderboard as far as sector stuff is concerned. Nice to see, considering the recent run.
  • Market internals are flat as a mat as the S&P pins 1270 on the nose. Edge? Only if you're listening to U2 cookie.
    I'm told--but didn't hear--that our all-star guitar was mentioned on CNBC. I say "our" because it'll only be in house for another 27 hours!

    R.P.

position in metal equities, pfe

Flashback! - Bill Meehan - 1:12 PM

This day in market history...

  • Closing levels 3 years ago today found
    • DJIA: 8627.40
    • S&P 500: 910.40
    • Naz: 1400.33
    • Crude: 30.15
    • Gold: 337.10
    • AMR: 7.32

This day in Minyanville history...

In other news...

  • In 1972, The Miami Dolphins completed the regular season 14-0 and went on to win Super Bowl VII. My prediction? The Colts lose next weekend in Seattle, which could be good for them.

Have a great weekend!

Anyone else spot the dandruff in the yield of the 10 year note? - Bennet Sedacca - 12:59 PM

We are now challenging the low end of the range of the recent range of yields in the 10 year note at 4.43%. The bottom of the range is in the 4.40% range, give or take a basis point. With the recent COT data I have reviewed, it would not be a stunner to see that 4.40 level breached. The question is of course, what is this telling us? If the 4.40 level is breached on a closing basis, there could be an awful lot of people caught offsides. If that were to occur, a quick trip to 4.10-4.20 could be expected with a serious inversion in the 2's to 10's spread.

If that were to occur, expect lots of talk of economic slowdowns or recession in 2006. Not advice, not a prediction, just some food for thought......I hope you all have a great weekend.

Serve and Volatility - Kevin Depew - 11:58 AM

Two things.

First, notice Crude getting hit hard, it was down more than 2.5%, while Unleaded Gas and Heating Oil futures were at one point a bit ago off more than 3% each.

Second, Bennet Sedacca's post this morning on volatility prompted me to take a look at the SPX/VIX ratio and the NDX/VXN ratio. The charts are quite interesting. See them below:

SPX/VIX Ratio

NDX/VXN Ratio


Charts courtesy Dorsey Wright.

You know the day destroys the night and night divides the day... - Todd Harrison - 11:27 AM

While expiration action is typically bookended by the bells, please note that Hoofy is trying to line up his ducks. The piggies are poking at BKX 106, breadth has edged 2:1 positive and the tenor is starting to sound a bit like Pavoratti.

The caveats? Single digit vols are a concern, as is a potentially lopsided lean into year-end. Still, setting stops removes emotion and with performance anxiety as it is, we gotta respect all sides of the probability spectrum. And, as always, I'll ask that you make absolutely certain that your risk profile and time horizon are completely in synch.

As always, I hope this finds you well.

R.P.

Does this mean better airplane food? - John Succo - 10:46 AM

Is there any other stock (of reasonable importance) that has done better than AMR? It is up 140% over the last several months.

Other airline stocks have done well also, like Continental (CAL), but not like this one.

Bulls believe that AMR benefits from other airlines are going bust. No argument there. But the real reason the stock is up is because people expect them to spin-off their "advantage mile" business.

A third party would get the right to control miles awarded, and thus "earn" fees from advertisers. Bulls believe that if AMR is successful in monetizing this business it could recoup $2-2.5 billion.

This assertion is now baked into the stock. Where it goes, nobody knows.

All I know is that airlines are still not making money. Will they ever?

Position in AMR and CAL

MIni-Minyan Mailbag - John Succo - 10:22 AM

"What is going on with the S&P spider (SPY). It usually trades about even with the other S&P ETF IVV, and certainly doesn't go down $.30 while the Index is up several dollars. Does this have something to do with expirations? Why aren't arbitragers selling IVV and buying SPY? Thanks. Minyan Steve"

MS-

The SPY every expiration Friday goes ex-dividend. Today it went ex $.67; so add this to the price to see where it is trading relative to other indexes and to yesterday.

Say what? - Kevin Depew - 8:49 AM

A look at commentary, opinion and analysis from around the world:

  • The New York Times says President Bush authorized the NSA to spy on Americans without court approval. But so what? The ends justify the means, right? (Oh, and buried down in the ninth paragraph the NYT admits holding the story for more than a year upon White House request.)
  • The Denver Post's John Henderson sets aside good taste and takes one for the team to "uncover" the secret of Hooters' success. (Link has no pictures.)
  • "You've got mail, and maybe gonorrhea." A new email service is providing people with a free, anonymous way to tell their partners that they might have picked up more than they bargained for, according to C/Net.
No positions in stocks mentioned.
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